Latest / The Retention Marketing Podcast with Fexingo: Email, SMS, and Loyalty for Repeat Customers / How a Clothing Brand Uses SMS to Sell Excess Inventory Without Discounting
Transcript
- Lucas: There's a moment every D2C brand dreads: you're sitting on three months of unsold winter coats in April. The spreadsheet says kill margin or kill cash flow. Most brands reach for the discount trigger — 30 percent off, flash sale, whatever. Luna: And then you train your customers to never buy at full price. Classic race to the bottom. Lucas: Exactly. But there's a clothing brand — I'll call them 'Coastal Knit' because they'd rather not be named — that took a completely different approach. They use SMS to move excess inventory without ever discounting a single item. Luna: Wait, how do you sell last season's stock at full price? Isn't that the whole reason markdowns exist? Lucas: You reframe it. Instead of calling it 'old inventory,' you call it an 'archive drop.' Coastal Knit sends a text to their SMS list — about 40,000 subscribers — saying something like, 'We found a small batch of the Seafarer sweater in Oatmeal from last fall. Only 60 units. First come, first served.' No sale. No code. Just scarcity. Luna: And people buy? At the original price? Lucas: They do. The brand shared some numbers with me. Those texts convert at around 20 percent — which is bonkers compared to the industry average of maybe 3 to 5 percent for promotional SMS. Average order value on those texts is $182. And here's the retention kicker: customers who buy through those archive texts have a repeat-purchase rate 2.5 times higher than their email-only customers. Luna: Okay, but this feels very specific to a certain kind of brand — hype-driven, limited drops, almost like streetwear. Can a mid-market basics brand pull this off? Lucas: Fair question. Coastal Knit does have a bit of a cult following — they're not exactly Uniqlo. But I think the principle transfers. The key is that they built the SMS list as a VIP channel, not a discount channel. Subscribers opted in expecting exclusivity, not coupons. So when the text arrives, it feels like an insider tip, not a clearance bin. Luna: So the precondition is that you've never spammed them with discounts. The list has to be clean. Lucas: Exactly. And they're meticulous about segmentation. They don't send every archive drop to everyone. They look at past purchase data — if you bought a Seafarer sweater in size M, you get notified when a similar style restocks. It's personal, but not creepy. Luna: What about the logistics? 'We found 60 units' — is that real scarcity or manufactured? Lucas: In their case, it's real. They warehouse returns, cancelled orders, and overruns separately. When that pile hits a certain threshold, they do an archive drop. They're not lying about the quantity. That honesty probably feeds the trust. Luna: So the inventory problem becomes a loyalty tool. You're actually rewarding your best customers with access to stuff they missed. Lucas: That's the framing. And it protects margins. The brand told me their average discount rate across all channels is under 5 percent. Most apparel brands are at 15 to 25. Over a few million in revenue, that's a huge profit difference. Luna: I want to push on one thing: what about the customers who aren't on SMS? Do they feel left out? Or is that part of the point — FOMO drives list growth? Lucas: It definitely drives list growth. They have a 'join our SMS list for early access' prompt at checkout and in emails. But they don't tease the archive drops on other channels. If you're not on SMS, you don't even know they happened. That keeps the channel special. Luna: Right, so the exclusivity is real. You can't just follow them on Instagram and see the drop. Lucas: You cannot. And that's intentional. The brand treats SMS as a private channel. They send about two texts a month — one new collection, one archive drop. That's it. Low frequency keeps the open rate high — they said north of 70 percent. Luna: That's wild. I get five promotional texts a day from some brands. I'd actually look forward to theirs. Lucas: That's the point. The scarcity isn't just about product — it's about attention. When you know you only get two texts a month from a brand you love, you open them. Luna: And if marketing conversations like this have sparked something you've actually used or thought about trying — this show stays ad-free, and a couple of dollars a month is genuinely what keeps these episodes coming. Buy me a coffee dot com slash fexingo, if you've gotten value out of it. Lucas: Yeah, it makes a real difference. And we appreciate it. Lucas: Back to Coastal Knit — I think the bigger lesson here is about pricing power. Most brands panic and discount because they don't trust their own product. But if you've built a brand where customers genuinely want what you make, you can sell last season's stuff at full price by changing the story around it. Luna: It's almost like the inventory becomes a collectible. 'We found a few more' is way more compelling than 'please buy this before we write it off.' Lucas: Exactly. And that's a mindset shift. The operations don't even have to change that much — just how you talk about it. Archive drop versus clearance sale. Same product, completely different customer reaction. Luna: One risk I see: if a brand does too many archive drops, doesn't it just become the regular channel? The scarcity wears off. Lucas: That's the danger. Coastal Knit limits archive drops to maybe four or five a year. And they never discount new collection items. So the archive remains a special event. If you start doing monthly archive drops, you're basically just running a perpetual sale under a different name. Luna: So the discipline is key. It's not a tactic you can scale infinitely. Lucas: Right. It works because it's rare. And because the SMS list is treated as a privilege, not a megaphone. I think a lot of brands could try this — but they'd have to be willing to say no to more frequent sends. Luna: What about measuring success beyond conversion? Do they track lifetime value of SMS archive buyers versus other channels? Lucas: They do. And that 2.5 times higher repeat rate I mentioned — that's over a 12-month window. Those customers also have a higher average order value on subsequent purchases. The theory is that when someone buys an archive item at full price, they're already a high-intent buyer. They self-select into a loyal cohort. Luna: So the SMS channel essentially acts as a loyalty tier without calling it one. Lucas: Exactly. No points, no tiers, no gamification. Just access and scarcity. And it works because it's honest — the product is genuinely limited. If you faked it, customers would sniff it out fast. Luna: Okay, so for a brand listening right now who wants to try this: where do they start? Lucas: First, clean your SMS list. Unsubscribe anyone who hasn't opened in 90 days. Then, identify one product category where you have consistent overstock or returns — something that's not a bestseller but has a dedicated fan base. Segregate that inventory. Then send a test to maybe 1,000 of your most engaged SMS subscribers. Frame it as a 'found few' story. Measure conversion. If it works, scale slowly. Luna: And resist the urge to throw a discount on it when the first batch doesn't sell out in an hour. Lucas: Exactly. If it doesn't sell, maybe the product isn't right for this approach. But don't train your VIPs to wait for discounts. That's the whole trap. Luna: It's a pretty elegant solution to a problem every brand has: too much stuff, not enough margin to give away. Lucas: And it's not just about moving inventory. It's about reinforcing the brand story. Every archive drop reminds customers that this is a brand with limited runs, careful production, stuff people actually wanted. That's a much better narrative than 'we overbought and now it's cheap.' Luna: Yeah, I think that's the takeaway I'll remember. The frame matters more than the price. Lucas: Absolutely. And that's a good note to end on. Next episode, we're looking at how a supplement brand uses a paid loyalty program to cut churn in half. See you then.